How to Make Improvement Programs Work

In the past five to six years, a number of biopharmaceutical organizations have developed internal operations excellence programs to drive performance improvement in all parts of the supply chain. How succesful have these programs been? Most recently, at our Biopharmaceutical Operations Excellence Consortium meeting (www.tefen.com/bio) held on June 5, at Amgen (Thousand Oaks, CA), we set out to answer that question. Over 40 participants from 15 companies attended and through workshops, presentations, and surveys conducted during the meeting we were able to gauge the state of operations excellence programs in the industry, identify what has worked and what hasn't, and judge where these programs may go in the future. As part of the meeting, Tefen conducted a survey on operations excellence programs and received responses from 11 companies.

Marc Puich

WHAT THE COMPANIES ARE DOING

The results of the survey indicated that the programs are primarily focused on achieving improvement in cost, quality, and cycle time. Over 80% of the respondents said that their programs have been in place for less than three years. According to the survey, the number of full-time resources dedicated to operations excellence ranged from one to 20. The survey also showed that most programs are designed around Lean concepts, with a much smaller number incorporating elements of Six Sigma.

STATE OF OPERATIONS EXCELLENCE

Unfortunately, the results of these programs have not been stellar. About 66% of respondents admitted only marginal success in meeting management expectations. Several themes applied to most of the companies driving these programs, which helped us understand the current state of operations excellence in the industry. Some of these themes included:

Evolution Versus Transformation

In many cases, the programs were not initiated as a top down, "big bang" initiative—typical of the GE or Motorola school of thought. These programs are small in scale, with only a handful of individuals driving projects close to the production floor. Although these initiatives can enable cultural and performance improvement on a localized basis, they can struggle in gaining momentum for higher-level, cross-functional projects that have more significant organizational benefits, and offer suboptimal utilization of resources and project selection.

Figure 1. Success of current operational excellences programs-the management perspective

Starting with Manufacturing

Most pharmaceutical companies began their operations excellence programs in the manufacturing area, probably because most of the methodologies were developed in other manufacturing industries. Nevertheless, more successful organizations have applied these tools more broadly and included quality, supply chain, and engineering. A focus on research and development (R&D) is still missing, however, because of political and cultural challenges. Nonetheless, R&D related improvements are high on the list of priorities for senior executives (see Manufacturing: BioPharmaceutical Operations Roadmap 2007 in the April 2007 issue of BioPharm International).

There is a Lack of Business Imperative

Although management supports these programs, there is a feeling that a business imperative is not yet there to make these programs transformational rather than incremental. The threats of direct competition, price controls, stricter regulatory requirements, and biosimilars are on the horizon, but the companies have not felt the need to act in anticipation of these challenges.

The Roadblocks Are Significant

Several participants admitted difficulties in making significant and lasting change without a "big bang" approach. Figure 2 shows the breakdown of where the challenges have been in driving the program forward. The lack of resources and middle management resistance top the list.

Figure 2. Most frequent challenges in the implementation of operational excellence programs

WHAT IS THE PATH FORWARD?

A few things must change for the majority of the existing programs to make more significant progress. Although the survey shows that senior management buy in has been achieved, it is not clear whether senior managers are demonstrating the required behaviors (and willing to make the difficult decisions) to make the program successful. Their involvement is critical to fill the gaps identified above—middle management commitment and lack of resources. Management needs to continuously articulate the need for change and prioritize the work of the organization by aligning it with the strategy, removing obstacles, and being adamant (although supportive) with their direct reports in following the objectives of the programs.

An additional challenge may come from the focus of the programs themselves. Are the projects being executed in alignment with the priorities and the business goals of the organization? Without specific, quantified objectives, and a clear definition of accountabilities (with consequences), these programs will always have a difficult time garnering the necessary support to make a significant impact. Many companies are discussing how these tools and techniques can apply in R&D, with a focus on driving faster (or more productive) product discovery and development.

At the end of the meeting, many participants expressed that driving operations excellence programs in biopharmaceutical organizations will take truly visionary leadership. The pressures that have led to successful Lean transformations in other industries or traditional pharmaceuticals aren't yet there in biopharmaceutical companies.

Biopharmaceuticals that have been most successful have had leaders who see the winds of change coming quickly and view operations excellence projects as something essential for running a successful organization. But like most things, it comes down to people.

Marc Puich is a partner at Tefen, Ltd., Foster City, CA, 650.357.1120 x117, marc@tefen.com